The Hindu Business Line : Kotak 30: Invest

Investors with low appetite for risk can consider taking exposure to Kotak 30. The fund’s return over the last one year has reiterated its ability to sail through difficult phases. While this fund may not be the best option for performance chasers, consistent returns over the last few years as well as the stability showcased during volatile markets such as the present one provides a good case for investment. The fund can form part of a core portfolio along with other long-term players such as HDFC Equity and DSP ML Opportunities.

Suitability: Kotak 30’s large-cap focus may offer a relatively safer exposure to investors wanting to enter the equity market now.

Over the last six months, the BSE Midcap and Small cap indices barely managed returns of 1.7 per cent and 0.4 per cent as against the Nifty returns of 8.2 per cent, reflecting the tough times faced by stocks in the lower market cap range. It should be noted that Kotak 30 (as the name appears to suggest) is not an index fund nor does it restrict itself to the basket of 30 stocks in the Sensex. The fund only seeks to hold 30 stocks (with a maximum limit of 39) in its portfolio.

Investing through a systematic investment plan (SIP) may be the most prudent option as any prolongation of the present market condition would provide ample opportunities to average costs. The SIP mode would also prevent huge declines arising from an ill-timed entry.

Performance: Kotak 30’s one-year return of 38 per cent over the last one year has comfortably beaten its benchmark — S&P CNX Nifty’s return of 29 per cent.

The one-year return of the fund is also superior to other large-cap funds such as HDFC Top 200 and DSPML Top 100 Equity.

Over a five-year period, the fund returned 50 per cent, beating its benchmark by a clear 13 percentage points. It, however, lagged its peer, HDFC 200, over this period.

That the fund has managed to consistently outperform its benchmark is evident from the monthly return over the last three years.

The fund beat its benchmark over 70 per cent of the times in the last 36 months, on a monthly rolling return basis.

Portfolio: Kotak 30 continues to have exposure of over 10 per cent in the capital goods sector. Software and telecom were the two sectors that underwent significant pruning over the last one year.

Exposure to IT was reduced from 14 per cent in February 2007 to 6.6 per cent in February 2008 on the back of concerns over a strong rupee affecting the overseas revenues of the IT industry.

Banking and financial services accounted for close to 17 per cent of the assets. Stocks in the banking space underwent steep declines post the Budget announcement of farm loan waiver. However, with the recent announcement of what appears to be the first tranche of funding (by the Government) for the debt waiver, the sector appears to hold out some prospects.

Mr Krishna Sanghavi and Mr Sanjib Goha manage the fund.

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